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TCP Marketing & Research Private Limited v/s Khurshid Alam


Company & Directors' Information:- TCP MARKETING & RESEARCH PRIVATE LIMITED [Active] CIN = U73100WB2009PTC138299

Company & Directors' Information:- TCP LIMITED [Active] CIN = U24200TN1971PLC005999

Company & Directors' Information:- ALAM & CO LTD [Strike Off] CIN = U60210WB1946PLC014227

Company & Directors' Information:- TCP INDIA PRIVATE LIMITED [Active] CIN = U74999MH2018PTC303901

Company & Directors' Information:- MARKETING RESEARCH CORPN OF INDIA LTD. [Not available for efiling] CIN = U99999DL2000PTC903948

    ACO No. 184 of 2016, APO No. 114 of 2017, CP No. 216 of 2014

    Decided On, 11 April 2017

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE SANJIB BANERJEE & THE HONOURABLE MR. JUSTICE SIDDHARTHA CHATTOPADHYAY

    For the Petitioner: Mainak Bose, Sounak Mitra, Advocates. For the Respondent: Susanta Dutta, Abhik Sarkar, Bimalendu Das, Advocates.



Judgment Text

Sanjib Banerjee, J.

The appellant insists that a Company Court in receipt of a creditor's winding-up petition does not have the authority to impose any condition while relegating the claim to a suit. For such proposition, the appellant relies on two recent and, apparently, yet unreported judgments of the Supreme Court.

2. The respondent applied, inter alia, under Sections 433, 434 and 439 of the Companies Act, 1956 for the company to be wound up on its failure or negligence to pay an undisputed debt. The respondent rendered services to the appellant by carrying out some construction at an office complex. The respondent duly raised bills for the works in accordance with an agreement between the parties. The respondent claimed that a balance principal sum of about Rs. 7.90 lakh remained due and owing from the appellant herein after giving credit to the monies paid by the appellant.

3. There were two statutory notices which were issued on behalf of the respondent. In response to one of such statutory notices, the appellant, inter alia, alleged that some of the work was left abandoned and incomplete and other parts of the work executed by the respondent were "sub-standard and unsatisfactory." In the affidavit affirmed by the appellant before the Company Court, it was alleged that the final bill had not been raised by the respondent; that there was a person by the name of Ajit Jain who was entrusted to do the job by the appellant and it was Ajit Jain who had engaged the contractor on behalf of the appellant and in the absence of Ajit Jain or such person certifying the bills for payment, there was no question of the appellant entertaining the bills.

4. On such facts, the Company Court took up the claim on November 15, 2016 and observed as follows before holding that a strong prima facie case for Rs. 7.90 lakh had been made out by the respondent and the Company Court relegated the claim to a suit upon the appellant herein furnishing an unconditional bank guarantee for Rs. 7.90 lakh within thirty days of the order:

"However, in reply to the second winding up notice the company admitted that out of Rs. 34,89,304.82p all payments save and except a sum of Rs. 7.90 lakhs approximately was not paid due to incomplete and unsatisfactory work of the petitioning creditor. The company also alleged that from time to time they had raised certain complaints about the inferior quality and unsatisfactory performance of the work. However, as a good gesture they released payments with taxes in favour of the petitioning creditor as certified by the site manager in full and final settlement of all sums due to the petitioning creditor.

"There are lot of inconsistencies in the stand taken by the company in its various replies as also it would be evident from the affidavit-in-opposition that there had been no contemporanious objection with regard to the quality of the work. It is also quite clear that payments were made on certification made by the site manager which runs contrary to the stand taken by the company that it requires a certification for Mr. Ajit Jain."

5. The appellant says that in the light of what was held by the Company Court, no security could have been directed to be furnished. The much wider proposition canvassed by the appellant has been noticed in the initial paragraph of this order.

6. For long, the principles involved in assessing the claim of a petitioning-creditor have been accepted to be the same tests as enunciated in the celebrated judgment of Kiranmoyee Dassi reported at 49 CWN 246 in a matter pertaining to a summary suit under Order 37 of the Code of Civil Procedure, 1908. The rules for assessment as laid down in Kiranmoyee Dassi were accepted in the judgment reported at (1976) 4 SCC 687 (Mechelec Engineers & Manufacturers v. Basic Equipment Corporation).

7. The same passage from Kiranmoyee Dassi has been quoted in a recent judgment reported at (2017) 1 SCC 568 (IDBI Trusteeship Services Ltd v. Hubtown Ltd), though in a different context and it has now been held that the tests borrowed from the judgment of Kiranmoyee Dassi in Mechelec no longer held good in a situation covered by Order 37 of the Code in respect of summary suits.

8. However, the jurisprudence on assessing a claim on a creditor's winding-up petition remains unaltered; and even unaffected by the judgment in Hubtown Ltd.

9. The appellant has relied first on an order passed in Civil Appeal Nos. 7225-7226 of 2015 (Jai Balaji Industries Ltd v. Southern Road Carriers Ltd) rendered on September 18, 2015. In that case the Company Court found that a certain amount was due to the petitioning-creditor and directed such amount to be paid in instalments together with interest. The Supreme Court observed that the appellant's order covered the debt admitted by the company to be due. The Supreme Court noticed that for the additional claim of the petitioning creditor the Company Court relegated the parties to a suit, but directed the amount covered by the balance claim to be deposited in Court. It was in such context that the Supreme Court observed as follows:

"We are satisfied, that the direction of the Company Court, extracted here in above, was wholly beyond the jurisdiction of the Company Court. The Company Court could neither entertain nor adjudicate upon the liability, which was not admitted during the winding up proceedings. In the above view of the matter, we are satisfied, that the aforesaid direction requiring the appellant to make a deposit of the balance amount with the Registrar on the Original Side by September 15, 2014 was wholly beyond his jurisdiction. The same is therefore liable to be set aside. And is accordingly hereby set aside."

10. The other order cited by the appellant was passed by the Supreme Court on February 13, 2017 (Pragma Buildtech Pvt. Ltd v. Ranjit Kumar Saha). In that case a Division Bench order of this Court fell for consideration before the Supreme Court. What is evident from the order is that without any apparent assessment of the claim, the Company Judge in this Court relegated the claim of the petitioning-creditor to a suit by directing cash security of Rs. 90 lakh to be furnished. In not interfering with the order carried in appeal, the Division Bench of this Court observed that there was neither any error apparent on the face of the record nor even that the Court had overstepped its boundaries. The Division Bench also observed that "The learned Judge has found that the explanation offered by the appellant/company regarding the sale transaction and the refund of excess stamp duty was difficult to accept."

11. The material part of the Division Bench order is quoted in the Supreme Court order. On appreciating the observations made by the Division Bench, the Supreme Court held as follows:

"In our considered opinion when the High Court refused to admit the company petition and granted liberty to the petitioner therein to file civil suit it could not had (sic, have) directed the petitioner to furnish cash security."

12. Such findings or pronouncements of the Supreme Court in the two cases have to be seen in the contexts and the appellant's submission cannot be accepted that the relevant sentences in the judgments enunciate a general proposition of law that a Company Court does not have the authority to require security to be furnished by a company while relegating the claim of a petitioning-creditor to a civil suit. The observations referred to and quoted above were made in the context of the cases where no conclusive findings on the quality of the claims were rendered, yet security was directed to be furnished.

13. It is here that the five tests that have held the field for the better part of a century as enunciated in Kiranmoyee Dassi need to be noticed:

"(a) If the Defendant satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the Defendant is entitled to unconditional leave to defend.

(b) If the Defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the Defendant is entitled to unconditional leave to defend.

(c) If the Defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the Plaintiff is not entitled to judgment and the Defendant is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security.

(d) If the Defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Defendant is not entitled to leave to defend.

(e) If the Defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plaintiff is entitled to leave to sign judgment, the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise secured and give leave to the Defendant on such condition, and thereby show mercy to the Defendant by enabling him to try to prove a defence".

14. For the present purpose, the first three conditions quoted above may not be relevant. It is only clauses (d) and (e) which are relevant for this discussion. There are two courses of action open upon a Company Court discovering that the company has no defence to the petitioning-creditor's claim: to direct payment to ward-off advertisements and the admission of the winding-up petition; or, to show mercy to the company by relegating the claim to a suit upon directing security to be furnished to the extent of the permissible claim.

15. The tests in Kiranmoyee Dassi were laid down in the context of a summary suit and they have been adapted to the context of a summary adjudication on affidavit evidence for creditors' petitions before the Company Court. This has been the consistent view for the best part of 70 years and though High Courts have been denuded of their company jurisdiction in recent times, the pending matters shall continue to be governed by the same principles.

16. Neither judgment cited by the appellant changes the rules of the game, so to say, in assessing a creditor's winding-up petition or disturb the wealth of jurisprudence on the subject over the last century or so. Indeed, neither order refers to the law on the subject or any previous authority. Both judgments have to be confined to the facts of those cases: that since there was no finding rendered by the Company Court that the debt was indisputably due, no security could have been asked for; and, no more.

17. In the present case, nothing in the judgment points to a conclusive finding of the indebtedness of the company to the extent of the claim of the petitioning-creditor of Rs. 7.90 lakh. Without there being a finding to such effect that there was no dispute qua the claim or the extent thereof, no direction could have been issued for furnishing security for such amount.

18. However, it is evident from the admitted documents appended to the appeal papers, particularly the chart appearing at pages 167 to 168 thereof, that the appellant herein admitted that

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a sum of Rs. 35,351.65/- had been retained by the appellant. There does not appear to be any justification for retaining such amount, notwithstanding the assertion in the chart that the retention was for the final bill not being submitted. 19. Accordingly, the appeal is allowed by setting aside the order impugned dated November 15, 2016 in so far as it directs security to the tune of Rs. 7.90 lakh to be furnished. However, the appellant should make payment of the admitted sum of Rs. 35,351.65/- within a fortnight from date to ward off advertisements. In default of such payment, the petitioning-creditor will approach the Company Court for appropriate directions to publish advertisements. There will be no impediment to the petitioning creditor pursuing the balance claim before an appropriate forum in accordance with law. 20. APO 114 of 2017 and ACO 184 of 2016 are disposed of as above, but without any order as to costs. 21. The appellant has graciously accepted that if the respondent files a suit in respect of the balance claim within four weeks from date, no ground of limitation will be urged to resist the same. 22. Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
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